Main Street Capital Corporation's (NYSE:MAIN) price-to-earnings (or "P/E") ratio of 9.3x might make it look like a buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 17x and even P/E's above 32x are quite common. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.
Main Street Capital certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
Check out our latest analysis for Main Street Capital
NYSE:MAIN Price to Earnings Ratio vs Industry January 9th 2024 If you'd like to see what analysts are forecasting going forward, you should check out our free report on Main Street Capital.
Does Growth Match The Low P/E?
In order to justify its P/E ratio, Main Street Capital would need to produce sluggish growth that's trailing the market.
Taking a look back first, we see that the company grew earnings per share by an impressive 56% last year. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.
Shifting to the future, estimates from the six analysts covering the company suggest earnings growth is heading into negative territory, declining 17% over the next year. That's not great when the rest of the market is expected to grow by 9.9%.
With this information, we are not surprised that Main Street Capital is trading at a P/E lower than the market. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.
What We Can Learn From Main Street Capital's P/E?
It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
We've established that Main Street Capital maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.
There are also other vital risk factors to consider and we've discovered 5 warning signs for Main Street Capital (2 are potentially serious!) that you should be aware of before investing here.
If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
与美国市场相比,Main Street Capital Corporation(纽约证券交易所代码:MAIN)9.3倍的市盈率(或 “市盈率”)可能使其目前看起来像买入,美国约有一半的公司的市盈率高于17倍,甚至市盈率高于32倍也很常见。但是,市盈率之低可能是有原因的,需要进一步调查以确定其是否合理。
Main Street Capital最近肯定做得很好,因为其收益增长是正的,而大多数其他公司的收益却在倒退。一种可能性是市盈率很低,因为投资者认为该公司的收益将像其他所有人一样很快下降。如果你喜欢这家公司,你希望情况并非如此,这样你就有可能在它失宠的时候买入一些股票。
查看我们对 Main Street Capital 的最新分析
纽约证券交易所:与行业对比的主要市盈率 2024 年 1 月 9 日 如果你想了解分析师对未来的预测,你应该查看我们关于Main Street Capital的免费报告。